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Shares in search engine giant Google have come under pressure following a miss in earnings and news that a key metric is still declining.

The Q3 earnings report was supposed to show a turnaround in the cost-per-click measure (CPC), which determines how much Google makes when a user clicks on an advertiser’s ad.

CPC was down 2% compared to the third-quarter of 2013, while earnings per share were $6.35 on $16.52 billion in revenue. Expectations measured by Thomson Reuters had been for EPS of $6.53 and $16.57 billion in revenue. However, the decline in the shares was ameliorated by news that the expected change in CPC had been -4%, so there was still some positive news.

Concerns are rising that Google is losing ground to its major rival Facebook, due to a failure to track post-click activity as effectively in order to provide more focused advertising. Paid clicks rose by 17% in the quarter, compared to Q2’s 26% jump, and while the management were keen to stress that ad volume was also important and that CPC should not be examined in isolation, the overall takeaway from the report is that Google still has ground to make up.

On a current PE of around 27 Google still trades at a much more reasonable valuation than Facebook’s 79, but in the game of tech earnings Google’s stumble will not go down well. The social media titan has recently relaunched its Atlas platform, which makes it easier to track customer activity across multiple devices and poses a severe threat to Google’s hitherto unchallenged dominance in the ad space.

It will take time for Atlas to gain traction but Google needs to keep improving the important CPI measurement if it is to avoid losing more business to Facebook. Apple Inc (All Sessions)’s new iPhone will also make life more difficult, boosting the appeal of the Apple network over Google’s Android system.

The share price rallied off the lows yesterday, but for the time being the loss of the 200-day moving average will send something of a bearish signal. Support could still be found around the May lows of $517.20, while post-results optimism could see a test of potential resistance around $548.80.

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